What Satya Nadella must do to fix Microsoft

Like any new chief executive of a large public
company, he will be under pressure to make an impact – fast. Better placed
than an outsider to know what’s needed, Nadella will nevertheless need time to develop a coherent
strategy. Outdoing Microsoft CEO Steve Ballmer, ever the salesman, always
looked like he was chasing a sale.

A coherent culture.Microsoft's most recent reorganization, which consolidated
eight divisions into four, was a first attempt to eliminate the dog-eat-dog
culture that has inhibited creativity at the company. Dismantling its forced
ranking system has been a useful adjunct to that. But the company badly needs a
sense of itself as a whole -- not a Darwinian jungle with each team out for
itself, but a company that stands for something. Nadella is, by all accounts, a
quieter character than Ballmer and less mythical than Bill Gates. He should regard
that as a strength, not a weakness. Domineering leadership stymies originality
and inspires the kind of submissive conformity that companies -- especially technology makers -- can no longer afford.

Embrace dependency. One legacy of the faith in internal competition was the
corollary that working on dependent programs or pieces of software was somehow
a second-class job. But from a user’s perspective, nothing could be further
from the truth. One reason a coherent culture is so critical is because it is a
necessary condition for coherent product lines -- the ability to deliver software
and hardware that interoperates seamlessly. Dependency, it turns out, isn’t for wimps -- it's for
grown-ups.

Safety first. Critical to an innovative culture is a climate of safety -- a
sense that mistakes and crazy ideas won’t wreck your career. One reason
Microsoft became less innovative was because its assessment system made
new ideas, and the debate that they need to flourish, professionally lethal. So Nadella needs
to make people feel that Microsoft is a company where risky ideas will get a
hearing.

Safety is a much underrated virtue. Few people rave about
hotels or restaurants or software that is safe to use. But that doesn’t mean it
doesn’t matter. As cloud computing becomes more pervasive, for example, the security risks
that it represents will grow exponentially. There are reputations and fortunes
to be made (or lost) by getting security right. And if the workforce feels safe
too, who knows what great ideas they might come up with?

Whither the PC? The personal computer, cornerstone of Microsoft’s fame,
influence and fortune, increasingly looks obsolete and anachronistic. Unifying
the interfaces between phones, tablets and laptops will give the PC a last
lease of life, but Nadella should signify a willingness to let the PC go if need
be. With PC shipments falling over 10 percent last year, according to Gartner, the PC may not last forever. Just because it built the company fortune
shouldn’t mean it owns the house. If IBM can abandon PCs, anyone can.

The big question, of course, remains whether Microsoft will
slim down, exit some businesses or break itself into smaller units. There are
no obvious answers here; everything depends on the logic behind decisions.

In
most companies, reorganizations and re-engineering typically cost a full year
in lost innovation and productivity. Nadella will want to avoid that – unless he
believes the status quo is more costly still.

Margaret Heffernan has been CEO of five businesses in the United States and United Kingdom. A speaker and writer, her most recent book Willful Blindness was shortlisted for the Financial Times Best Business Book 2011. Visit her on www.MHeffernan.com.